As Calif. Thrifts Surge, Feared Investor Cuts Stake in One

Just when California thrifts begin catching the eye of investors, activist shareholder Michael Price appears to be turning the other way.

The prominent head of Heine Securities Corp. sold nearly half his 8.6% stake in Bay View Capital Corp. during the past month. The sale of 257,200 shares in the $3.4 billion-asset San Mateo thrift, at prices ranging from $35.56 to $39 a share, gained Mr. Price a total of $9.6 million.

The move was revealed in a Securities and Exchange Commission filing this week, and it came as analysts are almost unanimously bullish on West Coast thrifts. These companies are said to be on the verge of a major consolidation wave. Bay View itself has been considered a prime acquisition candidate.

Last week, Rodman & Renshaw Inc., San Francisco, said that Bay View's share price could climb another 35% within 18 months - to as much as $50. In late trading Thursday, the stock was at $38.25.

So what gives?

Mr. Price, who gained attention last year for pressuring Chase Manhattan Corp. and Michigan National Corp. into deals, could not be reached for comment. But Raymond Garea, a vice president at Heine, cautioned the market not to read too much into its Bay View move.

"It's just a question of valuation," Mr. Garea said. "The stock has had a really big move, and management has done some things that made sense."

Indeed, Bay View's stock price has surged 36% this year, approaching what some analysts have estimated as its takeover price. Thomas O'Donnell of Smith Barney, for example, has predicted a near-term takeover price of $38 to $40 a share and a one-year target of $40 to $42 for Bay View.

Observers said that Mr. Garea's explanation of the stock sale is entirely plausible.

"They bought it low and sold it high; it could be as simple as that," said Thomas Theurkauf of Keefe, Bruyette & Woods Inc., New York.

"Just because a thrift is a takeover candidate doesn't guarantee that it's an excellent investment," he added. "There could be a point where a stock is bid up so much that there is little upside in a sale."

Bay View's chief financial officer, David A. Heaberlin, said he was not dismayed by Mr. Price's latest move, particularly since the stock price has continued to rise.

"They were sensitive to not doing anything to disrupt the market," Mr. Heaberlin said. "None of the commentary has been negative. In fact, they've told us that we are the only thrift that they still own in California."

Mr. Price sold enough stock to put his remaining stake just below 5%, the level at which regulators require more extensive disclosures.

Analysts estimated that the return from his sale about equals the amount of his original investment in the early 1990s, when the stock was trading in the high teens.

"They are value investors, which means they buy companies that are washed out or underperforming and then when the companies turn themselves around, they sell," said Campbell Chaney of Rodman & Renshaw.

As with his other investments, Mr. Price has been instrumental in some of Bay View's recent history. In fact, Mr. Heaberlin and the company's chief executive, Edward H. Sondker, moved into their posts after Mr. Price loudly criticized the company's former management at its 1995 annual shareholders meeting. Mr. Price demanded then that the company shape up or sell out.

The CEO at the time, John E. Brubaker, was forced out, and Mr. Sondker and Mr. Heaberlin were hired in the succeeding months.

Mr. Price "wanted the company sold at around $35 or so and be put out of its misery," said Mr. Heaberlin. "It was sort of a raucous meeting, and that led to us coming in."

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